Corporates chase impact and innovation with venture investments



ImpactAlpha, May 29 – No sooner had ImpactAlpha called the trend in corporate venture capital’s move into impact investing than came a flurry of deals that confirmed the rising “strategic” value of inclusion, sustainability and impact in corporate C-suites.

In those two months, we’ve reported at least one corporate venture deal of note per week, across cleantech, food and agriculture, and inclusive financial services. Corporations, from Salesforce and Tyson Foods to the oil giant BP, are backing impact ventures as a way to tap innovation, access new markets, and drive their own efforts at inclusion and sustainability. The deals have spanned Israel, Mexico, Brazil and India, as well as the U.S.

Another signal that corporate impact investing is on: not one but two events on the trend next month. One World, a social-impact training and investment firm, is hosting Innovations in Corporate Social Impact Summit June 14th in Redwood City, California, aimed at impact professionals inside Bay Area companies.

Two weeks later, Orange Silicon Valley, the venture arm of French telecom Orange, is producing a Corporate Impact Summit June 28 in San Francisco, to bring together corporations and entrepreneurs targeting strategic social impact.

>>MORE: SoftBank, Salesforce and Orange signal corporate venture capital’s tilt towards impact investing

For a firm like Orange, with 130 million mobile customers in 21 countries across Africa and the Middle East, reaching targets such as those set by the U.N.’s Sustainable Development Goals “helps enable the long-term sustainable growth of our company.” Goals such as sustainable cities and communities, affordable and clean energy, good health and well-being, and gender equality, “relate closely to our core business,” the firm says on the event website.

Corporate VC is becoming a significant source of startup capital, and reached an all-time high last year (like venture capital globally). Corporates deployed $31.2 billion, more than triple 2013 levels, into startups through 1,781 deals, or nearly one-fifth of the $164 billion in total venture capital transactions.

Salesforce doubles down

Salesforce, the cloud-software supplier, has been one of the most active corporate impact investors. The company’s $50 million Impact Fund has made 11 investments that have generated $54 million in revenue and $44 million in follow-on investment, according to its FY18 stakeholder report impact report. Those firms have created 326 jobs, reduced 15,000 tons of CO2, helped 339,000 people gain access to new financial services and unlocked $7.3 billion in donations.

Google joined Salesforce in this month’s $30 million Series B of peer-to-peer text-messaging platform Hustle. It was Salesforce’s second investment – just 10 months after the first — into the direct communication tool. Hustle has grown its revenues 20-fold over the last 15 months by supporting political campaigns, advocacy groups like the Sierra Club, as well as universities and other organizers and fundraisers.

>>MORE: Should impact entrepreneurs beware the strategic corporate investor? (podcast)

Companies like Hustle may align with Salesforce CEO Marc Benioff’s own politics, but TechCrunch noted another potential driver of interest: With Hustle using Salesforce’s software, there’s potential for “a well-aligned exit opportunity one day that could give Salesforce the same grip on text that its CRM has on email.” Salesforce actively supports more than 10,000 nonprofits and educational institutions through Salesforce.org.

Future of food innovation

As demand for meat soars and production levels become less and less sustainable, the race to bring down the cost of lab-grown meat is on. Food and agriculture is one of the sectors ripe for long-term investments, according to “Investing in Breakthrough: Corporate Venture Capital, a report from Volans, the U.K. think-tank. Others include cleantech, education, urban infrastructure and transportation and financial inclusion.

Earlier this month, Tyson Ventures, the venture arm of Tyson Foods, led a $2.2 million investment round for Israeli lab-grown meat startup Future Meat. The company hopes to cut the cost of its alternative meat to $5 to $10 per kilo by 2020 from its current $10,000 per kilo. In January, Tyson Ventures invested in Memphis Meats, another lab-grown meat company which is also backed by food giant Cargill (and Bill Gates). In December Tyson Ventures made its made its first lab-grown meat investment in Israeli startup SuperMeat.

“We continue to invest significantly in our traditional meat business,” Justin Whitmore, an executive vice president of corporate strategy and chief sustainability officer of Tyson Foods, said in a statement, “but also believe in exploring additional opportunities for growth that give consumers more choices.”

Produce giant Del Monte recently invested $4 million into vegetarian meal-kit company Purple Carrot to help the company improve its supply chain and develop a retail strategy. Purple Carrot expects the plant-based food and eating market to grow to $25 billion by 2020. “Securing this strategic investment from Fresh Del Monte is a huge validation of our business model,” said Purple Carrot’s Andy Levitt.

New markets

Global firms see a ripe opportunity in Brazil’s sometimes-difficult logistics. Brazil has one of the largest ecommerce markets in Latin America, accounting for 5% of retail sales in the country. But small businesses, which account for half of all jobs in Brazil and contribute about one-fifth of GDP, have trouble tapping the market. Mandaê is a Brazilian parcel shipping company with a clientele of small and medium sized e-commerce companies. The firm offers a pick up and packaging service specifically for small e-commerce businesses so they can outsource their delivery operations.

Earlier this month the venture capital arms of shipping company UPS and technology company Qualcomm piled into Mandaê’s $7 million Series B round, which included International Finance Corp., the Brazilian ecommerce site Mercado Libre and other investors.

In India, Amazon recently invested $22 million in Capital Float, an Indian fintech startup that provides working capital and cashflow loans to merchants that sell goods on e-commerce sites such as Amazon and Indian e-commerce giant Flipkart. For Amazon, Capital Float helps finance the small merchants selling on Amazon’s platform. (Walmart recently agreed to purchase a 77% stake in Flipkart.). Capital Float got its first $2 million in 2013 from Aspada, a small Bangalore-based impact investment firm.

Strategic sustainability

In Mexico, construction is one of the most dangerous jobs for workers. Internet of Things startup Prysmex provides employers with workplace and wearable sensors and geolocation tools to prevent accidents. In mid-May, Cemex Ventures, the venture capital arm of building materials company Cemex, invested an undisclosed amount in the firm. “The solution marks a fundamental advance in health and safety for the construction sector,” said Cemex, which made the investment after testing the platform in its own industrial plants in Mexico.

BP Ventures, the venture arm of BP, is helping the British oil giant navigate the shift to a low-carbon economy. Last week BP Ventures invested $20 million in StoreDot, a Tel Aviv-based venture that is building electric vehicle batteries that can fully charge in five minutes. In January, BP Ventures backed FreeWire, a separate fast-charging battery company.

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